In North Carolina, Medicaid Managed Care Companies Finding New Opportunities

ASHEVILLE, N.C. — In the hallway outside meeting rooms at the North Carolina Public Health Association, exhibitors gave away pens, chocolate and brochures. The types of organizations that usually attend public health conferences were in attendance: companies selling electronic health records, vaccine manufacturers and advocacy groups such as the Alzheimer’s Association.

But at this year’s conference, there were three new exhibitors – Centene Corporation, Amerigroup and UnitedHealthcare – all companies that potentially would bid for contracts with North Carolina should the state decide to privatize Medicaid, the program that provides health care to almost 1.6 million disabled and low-income patients in North Carolina.

“I was the one who asked them to come and sponsor our meeting,” said Lynette Tolson, head of the Public Health Association.

Tolson explained that if state health leaders decide to invite private, for-profit managed care companies to run Medicaid, she wants to make sure public health is part of the conversation.

“Prevention has got to be part of the solution, and that’s who we are,” Tolson said. She also said many local health departments rely on the Medicaid reimbursements they get from patients they see to fund public health activities.

She worried that for-profit managed care companies would not send their Medicaid patients to health departments for care, depriving them of needed revenue to fund other projects.

“No one pays for obesity prevention, tobacco-cessation education,” Tolson said, noting that state dollars for public health prevention campaigns have dwindled in recent years, and so health departments move money around to do prevention work.

Tolson was responding to something that’s seeming more like a possibility in North Carolina: that the state Medicaid program will be privatized, run by managed care companies.

And managed care companies are working on that assumption too. They’re aggressively making overtures to health care providers throughout the state, hiring lobbyists and setting up offices in [state capital] Raleigh, even though the Department of Health and Human Services has not delivered to the legislature a plan for converting Medicaid, and the General Assembly has not yet given a green light to DHHS and Gov. Pat McCrory to move ahead with their proposal to privatize.

Voicemails, emails and visits

In the budget passed by the General Assembly in July, legislators directed McCrory to create a five-member Medicaid Reform Advisory Group “to advise the Department of Health and Human Services in its development of its detailed plan to reform Medicaid.”

That advisory group is supposed to help DHHS create a plan to be delivered to the General Assembly no later than mid-March, and then the legislature can take up proposals made by the committee and DHHS during the short legislative session next spring.

According to a McCrory spokesman, the governor’s office is currently reviewing candidates and will make the appointments in the future, but he declined to give a timeline on when the advisory group would be appointed.

Even if the advisory committee recommends privatization, there’s no guarantee legislators will go along with a privatization plan. Several members of the legislative oversight committee on health and human services have expressed public misgivings about managed care for Medicaid, including Rep. Donny Lambeth (R-Winston-Salem), a former hospital president.

Lambeth penned a letter to the News & Observer in May that read in part: ” Other states are moving away from for-profit managed-care companies toward the [Community Care of North Carolina] model, so why does North Carolina want to move in the opposite direction?

But that hasn’t stopped representatives from managed care companies from reaching out to people within North Carolina in anticipation of change.

In a Sept. 23 email to the head of several of the state’s 14 Community Care Networks, the collaboratives that make up Community Care of North Carolina, Michael Dieterich, a representative from Michigan-based Meridian Health Plan wrote:

“I wanted to reach out to you in order to gain a better understanding of the Community Care of North Carolina (CCNC) relationship that Northwest Community Care Network has in its market.… If I were to contract with you, would all of the hospitals, physicians and ancillaries that fall under your umbrella be included in the arrangement or would they need to be negotiated separately? Also, which hospitals, physicians and ancillaries do you represent?”

In his email, Dieterich also mentioned a Medicaid “Request for Proposals,” the process by which government solicits bids for work to be done.

“My first reaction was puzzlement,” said Susan Davis, head of the Community Care Network for Johnston and Wake counties and one of the recipients of the email. As far as I know, there hasn’t been a plan; there’s not an RFP that’s out there.”

“It seems premature.”

“It’s unusual for a managed care company to call that way,” said Tammie McLean, Community Care Network director for the Sandhills region.

“I can’t remember anything like this before,” she said. “There are other entities that do similar things, or run integrated health systems, that will sometimes contact us to ask how we do something, but not a managed care company.”

On the same day, McLean and Davis also received voicemails from a representative of WellCare Health Plans, saying that Medicaid head Carol Steckel suggested he call.

That was also the day Steckel resigned her position as Medicaid head to take a job with WellCare.

When asked about the messages, DHHS spokesman Ricky Diaz wrote in an email that since the governor announced his plan for Medicaid reform, “DHHS has been encouraging dialogue among the health care provider community of how best to meet the governor’s vision of creating a predictable and sustainable Medicaid system that improves care and treats the whole person. While DHHS has not been directing these types of meetings or conversations, it makes sense that it would be happening.”

UNC Hill health economist Mark Holmes said it’s possible the managed care companies are working ahead to next summer in hopes there’s a privatization plan.

“Negotiating with providers can be a long process,” Holmes said, noting that managed care companies might be trying to connect with Community Care networks because they know the lay of the land.

“It can be more efficient if you need to find providers rapidly to find a mechanism that they’re familiar with, and Community Care has 15 years of experience in the state,” he said. “It’s a known entity to many providers.”

Paul Mahoney of Community Care of North Carolina, the umbrella organization that includes all of the Community Care networks, said he thinks the company representatives probably don’t know how Community Care works. The local networks are organizations that function more to bring together health care providers to share best practices and coordinate care, while the CCNC umbrella organization is actually the one that contracts with Medicaid to provide care and pay the bills.

“We’re not sure why these companies are calling our local networks rather than the central office or why the state Medicaid director would be involved in recruiting efforts,” Mahoney said.

Staffing up

Meanwhile, since McCrory and Wos announced plans to invite managed care companies to run the state Medicaid programs, calling them comprehensive care entities, national companies have heightened their presence in North Carolina, including hiring powerful lobbyists and establishing offices in Raleigh.

Missouri-based managed care company Centene has had lobbyists and offices in Raleigh for several years, but this year the company ramped up its presence. Centene lost its lobbyist, Theresa Kostrzewa, ranked as one of the 10 most powerful in Raleigh by the N.C. Center for Public Policy Research, but the company has hired four more lobbyists based in Raleigh this year.

Kostrzewa went to Steckel’s new employer, Florida-based WellCare, as the company’s first lobbyist.

United HealthCare, based in Minnesota, has had high profile lobbyists in place for several years, first hiring Democratic operative Ed Turlington and adding former Republican Party head Tom Fetzer, in 2011, after Republicans took over the legislature.

Other managed care companies Molina, Virginia-based Amerigroup, Aetna and HMA have either newly established lobbyists or are adding to their lobbying power here.

All this activity worries Sarah Somers of the Washington, D.C.-based National Health Law Program. Somers has been following the national track records of some of the managed care companies that are making moves in North Carolina. She has compiled a list of almost 100 cases against state Medicaid programs that involve managed care companies in more than 30 states that have companies operating all or part of those states’ Medicaid programs (see below).

“Before North Carolina rushes into this, we need to give serious consideration to the problems that states around the country have had with the quality of care delivered by these entities,” Somers said.

She said so-called “capitated” plans, in which a managed care company gets a set amount of money per enrollee to deliver care, have incentives to cut corners.

“You’re accepting a pot of money to provide all the services that they need, and if you provide fewer services you get to keep the money,” Somers said.

“It’s not demonizing these companies to point out that a private, for-profit entity is beholden to their shareholders,” she said. “It’s not to say that they can’t carry out their duties, but this is a strong incentive to deny care to patients who need it.”

Some patients with mental health disabilities in North Carolina have been complaining of similar problems with the state-funded managed care organizations running behavioral health services, a system that became fully operational earlier this year.